Former Arkansas lawmaker avoids prison for kickbacks

Prosecutor cites aid in case for Neal’s house-arrest term
by
Doug Thompson
|
September 14, 2018 at 4:30 a.m.
3comments

Micah Neal heads to court Thursday in Fayetteville.

FAYETTEVILLE -- Former state Rep. Micah Neal will spend the next year confined to his home, but he dodged prison time for his role in the kickback case that sent one of his three accomplices to prison for 18 years.

"Today's sentence sent a message," U.S. Attorney Duane "Dak" Kees said after Thursday's sentencing hearing in federal court in Fayetteville. "We know that multiple bribes have been paid. It is in the best interest of those who know about them to come to the authorities and cooperate."

Neal's sentence reflects the cooperation he has given and that he is expected to give in ongoing federal and state investigations into corruption in state government. Expect more indictments, Kees said, but he is not free to discuss details.

Neal called his sentence a far more merciful one than he expected.

"It was a pipe dream," he said after receiving three years' probation, including one year of house arrest. "I never thought it would happen."

Neal came forward before he was charged or even told he was the target of an investigation, Kees and Neal's defense attorney, Shane Wilkinson of Bentonville, told the judge during the hearing.

U.S. District Judge Timothy L. Brooks stressed throughout the hearing how rare a sentence with no prison time is in a corruption case against an elected official who has betrayed public trust. Neal was fortunate to be in a position where his cooperation could be so valuable in other cases, Brooks said.

Five former state lawmakers have been convicted for kickbacks, misuse of state funds or bribes in the investigation, and a sixth was charged in Little Rock in a related case, federal court records show. Another two former executives of a nonprofit are charged in state court in a related investigation of Medicaid fraud.

Neal will be monitored electronically and can leave home for work, medical reasons and religious services, Brooks ruled. After the first year, Neal will serve two years of probation. During those two years, he is required to log 300 hours of community service, the judge ruled. Neal will also have to bear the expense of the monitoring and pay $200,000 in restitution.

"Your honor, I will spend the rest of my life trying to redeem myself," Neal told the judge before his sentence was announced.

Brooks said he had never granted such a large sentencing reduction as the government asked for in Neal's case. The decision stripped more than seven years off the maximum sentence Neal faced on his guilty plea to one count of conspiracy to commit fraud.

"I wish I could go into detail, but we want to send a message to others that if you do like Mr. Neal, come forward immediately and truthfully do what the the government asks -- even if it hurts you economically -- you will be rewarded for it," Kees told Brooks.

Brooks said Neal's actions throughout the case were the best argument for the sentence reduction.

"Mr. Neal's cooperation in this case is not solely responsible by any means, but is very largely responsible for many indictments and guilty pleas, not just in his co-defendants' but in other cases," he said.

The longtime Washington County Quorum Court member and heir to his family's Neal's Cafe pleaded guilty in January 2017 and agreed to testify against his co-conspirators. Sentencing was delayed as the cases of two of his accomplices went to trial.

The jury in U.S. District Court in Fayetteville found those co-defendants, including former state Sen. Jon Woods, guilty on May 3. Woods last week received a sentence of 18 years, four months. A third co-defendant pleaded guilty before the trial began.

Neal received $38,000 in kickbacks in return for steering state General Improvement Fund grants to two entities, according to his guilty plea. He also testified he put a $1,000 campaign donation for his 2012 state House race into a personal account.

LOOKING FOR CASH

Neal was financially strapped in 2012 when he asked Woods, a friend and fellow Springdale delegation member, how he could make money, according to his court testimony against Woods in April.

Neal testified he drew more than $100,000 a year from his family's restaurant and thousands more a month from legislative per diem, but still was struggling financially.

He and Woods started a scheme with Oren Paris III, then-president of Ecclesia College, and businessman Randell Shelton Jr., a mutual friend of Paris and Woods.

Neal and Woods steered state grants to Paris' small, private Christian school. Paris signed a contract with a company Shelton created, Paradigm Strategic Consulting. When Ecclesia received a state grant, the college would pay Paradigm fees. Most of those fees flowed to Woods and Neal through Shelton as kickbacks, according to federal prosecutors.

Woods and Neal also convinced other lawmakers who were not in on the plot to direct grants to Ecclesia. Each lawmaker received a share of improvement-fund money that he could distribute to either government bodies or nonprofit groups.

In all, the college received $715,500 in such grants from 2013 through 2014. Of that, Woods and Neal were directly responsible for $550,000.

Woods and Neal also structured a separate deal with Milton R. "Rusty" Cranford, a lobbyist who was also an executive for Preferred Family Healthcare Inc. of Springfield, Mo. Cranford pleaded guilty to a conspiracy charge earlier this year in federal court in Missouri in an unrelated case. He remains in the Greene County, Mo., jail while awaiting sentencing.

In the deal struck with Neal and Woods, Cranford and David Carl Hayes of Springfield, Mo., incorporated a company called AmeriWorks in Bentonville in 2013. The company applied for and received $400,000 in General Improvement Fund grants to train workers for a new industry that would move to Northwest Arkansas.

Cranford returned the AmeriWorks grant in September 2014, after federal investigators questioned him about it, according to court records. Neal and Woods, unaware of the investigation, redirected $200,000 of the returned money to Ecclesia and received kickbacks from it, according to court records.

NEAL'S HISTORY

Neal, a Republican, was a member of the Washington County Quorum Court before running for state representative in 2012. He didn't seek re-election in 2016, but announced he would run for county judge of Washington County. He dropped out of the race a few months before his guilty plea, citing family concerns.

Neal is the fourth generation working in his family's restaurant, a longtime Springdale gathering place for politicians. He was working at the cafe and serving as a state representative in 2013 when he met with Cranford, Woods and Mike Norton, the then-director of the Northwest Arkansas Economic Development District, which administered the General Improvement Fund grants.

Norton testified that the meeting was to discuss how to award the grants to AmeriWorks since it didn't have 501(c)3 tax status as a nonprofit when it applied. The group decided to use a Preferred Family Healthcare tax-exempt status, Norton said.

Neal also testified he later accepted a $18,000 kickback in two envelopes filled with $100 bills behind Neal's Cafe.

He was the government's first witness in Woods' trial. He also testified to a federal grand jury in Fort Smith in 2016 and met with federal investigators on at least six occasions in their investigation, Wilkinson said.

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Comments

So, all you other legislators that the prosecutor said yesterday they know are out there, what's it gonna be? Tell the truth now, if you are capable, or spend the next 18+ years in the pokey with Bubba? I'm sure some think they are so slick it will all slide off of them. Well, let's see, they've indicted the governor's nephew. Are you more special than that? And, Ballinger, Bledsoe, Charlie Collins, Bart Hester, where are our apologies that you contributed thousands of dollars to this scam, which is of public record for all to see? You could at least show that much remorse. I hope that all of you end up with some form of punishment, either for being complicit or just naive to the point of dumb. Either way, it is certainly not people of your caliber we need running our state. And, I have noticed how many legislators seem to be broke. Clearly, if you can't manage your own finances, you can't be trusted with millions of our tax dollars. So, man up, admit what you did, or, according to this week's sentences, say hello to your long-time cellmate Bubba.